Prime Rate Premium Finance Corp., Inc. v. Larson

OPINION AND ORDER GRANTING IN PART DEFENDANT BRANDON
LARSON'S MOTION FOR SUMMARY JUDGMENT AND DENYING
Plaintiff's MOTION FOR LEAVE TO FILE A SECOND AMENDED
COMPLAINT

DAVID
M. LAWSON United States District Judge

The
question presented by defendant Brandon Larson's motion
for summary judgment now before the Court is whether the
plaintiff has presented any evidence that Brandon committed
or aided his parents, Karen and Keith Larson (owners and
operators of Larson's Insurance Solutions, Inc.) in
perpetrating the fraudulent scheme described in the amended
complaint. The scheme consisted of presenting phony insurance
premium finance applications to the plaintiff, not applying
those loan proceeds to pay for the insurance policies, and
pocketing the money instead. The plaintiff seeks to tie
Brandon into the scheme on two theories. First, it argues
that Keith Larson appointed Brandon as a “Designated
Licensed Responsible Producer” of the Larson insurance
agency, and therefore Brandon is responsible for the
agency's conduct as a matter of law. Second, it points to
certain premium finance agreements that Brandon signed, and
to other activity that supposedly was intended to further the
fraudulent scheme, as evidence of Brandon's actual
participation. However, except in two instances, neither the
law nor the evidence supports the Plaintiff's claims
against Brandon Larson, and therefore the Court will grant in
part his motion for summary judgment. The plaintiff also
seeks leave to amend its complaint a second time to add
allegations that Brandon supervised the fraudulent activity
at the agency. But the amendment comes too late, and it would
be futile, because the evidence does not support the
conclusory allegations proposed by the amendment. The motion
to amend, therefore, will be denied.

I. A.

Larson's
Insurance Solutions, Inc., known by the acronym LISA, was
formed by Keith Larson in 2005. Keith Larson was the
president, secretary, treasurer, and director, but according
to Brandon Larson, Karen Larson was really the person in
charge of LISA. The Larsons formed the company to sell
insurance products.

Michigan
insurance law requires any business acting as an insurance
producer to designate at least one “individual licensed
producer responsible for the business entity's compliance
with this state's insurance laws, rules, and
regulations.” Mich. Comp. Laws § 500.1205(2)(b).
That designation usually is made on the application form,
FIS-0202, which lists the “Designated/Responsible
Licensed Producer, ” or DRLP. More than one person may
be listed. Keith Larson submitted an FIS-0202 form on April
25, 2005, listing five individuals as DRLPs, including
himself, Karen, and Brandon. Brandon Larson argues that the
form lists him only as a “producer, ” which is a
term broadly defined under Michigan law to include any person
or entity that assists in procuring an insurance policy.
Mich. Comp. Laws § 500.1451. But Keith Larson's
FIS-0202 plainly listed Brandon as a DRLP. Michigan's
Department of Insurance and Financial Services (DIFS)
apparently took that information and incorporated it into its
data base, which identifies Brandon Larson as one of
LISA's DRLPs.

Brandon
asserts that he never agreed to serve as a DRLP for LISA, and
Keith listed him as such without Brandon's permission.
Keith signed an affidavit confirming that. The plaintiff has
not produced any evidence to the contrary, although it argues
that the Court should disregard Keith's affidavit because
he suffers from dementia and was not competent to sign it in
August 2016. Individuals can be added or removed from the
state's records of official positions at an insurance
agency by submitting form FIS-0200. The form has a spot for
the signature of a person to be added as a DRLP, signifying
acceptance of that responsibility. LISA filed several
FIS-0200s over the years, but none of them mentioned Brandon
or contained his signature.

There
is no dispute that Brandon is a licensed insurance producer
in Michigan. He began pursuing his insurance license while he
was in college and obtained it in September 2005. There also
is no dispute that LISA employed Brandon. While employed
there, he sold and serviced property and casualty insurance
policies.

Brandon
describes LISA as Karen Larson's company, although it was
managed by Joanna Dellin. LISA's organizational chart
shows Karen at the top of the chart, immediately followed by
Joanna Dellin (Agency Manager), who is followed by Greg Winay
(Commercial Lines Director/Director of Operations). Keith
Larson appears to be on the same level as Karen, but he was
responsible only for life and health insurance; he had no
subordinates at the time the chart was created. Brandon is
shown to be subordinate to Greg Winay for commercial lines
compliance, and otherwise subordinate to Karen Larson
directly. The chart shows that Brandon had one subordinate:
account manager Janice Reed. Brandon testified that he had an
assistant during 2013 and 2014, first Martha Bledsoe and
later Nancy Gandolfi.

B.

Plaintiff
Prime Rate describes itself as a premium financing company.
It loans money to applicants to pay insurance premiums when
the insurance companies will not give favorable financing
terms to those persons or entities who want to buy insurance.
The loans are documented in the form a premium finance
agreement (PFA). This case concerns fourteen PFAs that LISA
submitted to Prime Rate purportedly to finance insurance
premiums for LISA's customers.

Under
the terms of the PFAs, Prime Rate sent the full amount of the
insurance premiums to LISA with the understanding that the
funds would be forwarded to the insurance provider to pay the
premiums in full for one year of coverage. LISA's client
(the insured) would then make monthly installment payments to
Prime Rate until the loan was paid.

Prime
Rate alleges that Karen and Keith Larson committed fraud when
they submitted the fourteen PFAs entered into in 2013 and
2014. It alleges that some of the PFAs were forged, some
clients did not need a PFA (because they paid their premiums
in full), LISA received funds from Prime Rate but did not
forward the payments on to the insurance companies, the
insurance policies did not exist, and LISA obtained more than
one PFA on the same insurance policy. As a result of the
fraudulent scheme, Prime Rate did not receive payment of
$321, 510.16.

It
appears undisputed that a fraud was perpetrated. But Karen
and Keith Larson contend that they were not responsible for
it, insisting that it was the work of one or more of their
rogue employees. The plaintiff contends that Karen and Keith
were the masterminds behind the scheme, and that Brandon had
a hand in it as well.

Findings
from a Michigan DIFS investigation implicate Keith and Karen
in the scheme.

DIFS
issued a report on May 14, 2015 that stated:

Respondents
Keith L. and Karen L. have provided justification for
suspension and revocation of licensure by using fraudulent
and dishonest practices and/or demonstrating
untrustworthiness, incompetence and financial
irresponsibility in the conduct of business by:

i. Obligating customers to repay premium finance loans they
did not authorize or ...

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